End of the ‘App Store’ fantasy

A great shift in thinking was evidenced on the first day of the Telematics West Coast 2015 conference, held yesterday and today in San Diego.

App stores, once seen as the major way of creating value in connected cars for consumers and carmakers, now are seen as a necessary feature, much like navigation but not a potential revenue source.

Consumers remain unwilling to pay for connectivity and, in response, most manufacturers are lengthening the period when connectivity is free, up to as much as 10 years in the case of BMW, according to Jeffrey S. Hannah, director, SBD North America. He was emphatic: "The biggest mistake is the assumption that there is a killer app, leading to a search for killer ROI (return on investment)."

To avoid this mistake, he said, carmakers should move from seeking a return on investment from basic subscriptions to looking for "holistic ROI" – mostly to be derived from savings. He outlined and quantified 12 opportunities. For example, by tracking actual customer usage of equipment or services, and ceasing to manufacture or support of those with low utilisation, SBD calculates that a carmaker could save $100M (£65M).

Of course, there are costs for the hardware, software, staffing and connectivity for each of those 12 strategies. His bottom line: an automaker should be able to achieve 100% positive return on investment in five years by taking advantage of these opportunities.

Richard Barlow, CEO of Wejo, a company that builds software apps and cloud-based solutions, applied that point to insurance companies, as well. He said: "UBI is not an acquisition method but data from connected cars will help insurers be more profitable businesses and, if so, they need to share some of that back with drivers and OEMs."

"App store models don't permit integrations between content providers, and desired search results will not return a task-completed outcome,” said Pavan Mathew, senior director of automotive content service strategy for Nuance. He spoke about a "contextual wave," where a car can anticipate the needs of the driver or occupants and bringing back what's needed.

OTA to keep cars current

The ability for OEMs to provide OTA updates was a major theme on the first day. OEMs are looking to OTA updates to help them iterate faster, as well as to fix flaws.

But there are barriers. The first is organisational, according to Scott Kirchner, CTO of automotive systems at Panasonic. He said: "Automakers are good at integration pre-launch but, post-launch, there are not even organisations within the OEM that do that."

Liability is another barrier. What if an OTA update fails, for example? Bryant Walker Smith, an assistant professor at the University of South Carolina School of Law, gave a stern warning about how product liability law might be applied to connected cars. He said: "Liability for these issues will go as far up the supply chain as the defect can be traced. We're talking about everyone."

Still another barrier is notifying and explaining to car owners that their vehicles will not be usable during updates, noted Tim Nixon, former CTO of OnStar.

The ability of carmakers to provide OTA updates and fixes will impact auto dealers and a panel composed of Rich Shannon, telematics division manager of Honda North America; Jason Schulz, business development and partnerships manager for Toyota; and Anette Gaven, marketing director for Novatel Wireless, discussed this. The consensus was that, while dealers may lose revenue from performing updates in the shop, this could let them focus on higher-value service work. At the same time, improved customer satisfaction from automatic updates could improve loyalty to the dealer.

Can carmakers get sexier?

Christopher Heiser, CEO of Renovo Motors, a self-described "mini-OEM" that recently released a demonstration EV, tweaked traditional manufacturers as being unwilling to work with small, innovative companies. He said companies like his, as well as Tesla, Uber and upstart carmakers from Asia, begin with a blank slate and therefore can define the technology they use and are willing to take more risks.

At the same time, he said, technology is being rammed down the industry's throat by consumers who are used to it on their smartphones.

Frankie James, managing director of GM's Advanced Technology Office (ASTVO), acknowledged that carmakers are a bit too risk-averse. She said: "We need to take a few more chances than we traditionally do." She thinks that consumers might accept the blue screen of death in their infotainment systems once in a while – just like on their phones.

In a panel debating whether manufacturers have the expertise to keep up with standards set by consumer electronics, Steffen Neumann, portfolio manager at Mercedes-Benz R&D North America and Cason Grover, senior group manager of cross carline planning for Hyundai, detailed the tactics their companies are using to keep up.

Neumann, noting that Mercedes's Silicon Valley presence is now 700-strong, said that it's using a browser-based approach to delivering apps, which allows for easy updates and changes.

Grover added that top R&D executives in Hyundai's Korean headquarters come from the CE sector. "Driving that from the top changes expectations," he said.

Still, Jason Stinson, CTO of Renovo Motors, said it would be helpful for Tier 1 suppliers and carmakers to make more of an effort to work with small companies. "The supply chain tends to get a seat at the table too early," he said. Manufacturers should try to find ways to bring start-ups in earlier in the process.

Mark Platshon, senior advisor to BMW iVentures, spoke about how his investment organisation works outside the strictures of the corporation. In a discussion of what BMW iVentures has learned, he said: "You can't find the black swans, they have to find you. The whole purpose of a venture group is to plant a flag [saying], 'I have money, I have skills, I can help. Please find me.' It's a big advertisement."

Liz Kerton, executive director of the Autotech Council, noted that 18 automakers have presences in Silicon Valley. She also presented a lightning round of four start-ups in the area:

• DriveMode uses the smartphone to provide a connected-car experience.
• Strobe has patented technology to make LIDAR perform better while reducing the hardware cost.
• SyndicatedMaps uses crowdsourcing to create databases of traffic cameras and dangerous intersections.
• 5D Robotics provides highly accurate positioning technology that can be used for self-driving vehicles of all kinds.

Call for security

Walter Buga, CEO of Arynga, a provider of technologies to manage software and firmware OTA updates, said: "Security will be a major driver of OTA updates." He noted there is a shortage of security skills in the connected-car industry, while most carmakers do not have the organisation in place to design and manage security. Some are hiring security officers, others are hiring consultants. He also thinks innovation from start-ups will provide solutions.

Alan Ewing, president of the Connected Car Consortium, spoke up for driver distraction testing and certification. He said the industry needs a standardised approach for testing both devices and applications in a holistic way. Guidelines should include:

• Specifications
• Simulators
• Test cases
• Driver workload verification

More than 200 attendees represented every aspect of the industry – app developers, carmakers, platform providers, insurers, consultants, and providers of content and services.

At the show, Integrated Computer Solutions, a custom software development and UX design shop, announced that its Qt-based HMI solution is now supported on the GENIVI Demo Platform (GDP). The company said that the GDP's flexibility combined with its Qt components allowed it to create a powerful and adaptable in-vehicle infotainment solution.

In a comment that serves as a wrap-up for the first day of the conference, Panasonic's Kirchner told the audience that new business models and partnerships demand new ways of thinking. He said: "Don't make assumptions about how people make their money. We need the willingness to come to the table and understand the whole value chain. Finding win-win opportunities is only way."